Chinese-founded fast-fashion company Shein is set to face stricter EU online content rules as it reports a significant number of users, placing it in the same category as major companies like Meta Platforms, Google, and TikTok. The Digital Services Act requires companies with over 45 million users to take more action against illegal content and counterfeit products. This development adds to the challenges Shein may face in pursuing its IPO plans.
Shein Faces Stricter EU Online Content Rules Due to Large User Base
( Credit to: Usnews )
Chinese-founded fast-fashion company Shein is facing stricter online content rules in the European Union (EU) due to its significant number of users. This places Shein in the same category as other major companies like Meta Platforms, Google, and TikTok. The new regulations, known as the Digital Services Act (DSA), require companies with over 45 million users to take more action against illegal and harmful content, as well as counterfeit products on their platforms.
Shein entered the EU market in August of last year and has reported an average of 108 million monthly active users across EU member states between August 2023 and January 2024. This user base has caught the attention of the European Commission, which is currently in contact with Shein regarding a possible designation under the DSA rules. However, no specific timeline for the designation has been provided.
The DSA, which came into effect on February 17, applies to all online platforms. Sixteen tech firms, including Amazon, Apple, Alibaba, Microsoft, and three pornography sites, are already subject to these regulations. The EU has requested information from some of these companies about the measures they have taken to combat illegal content and the sale of illicit goods online. The European Union is also investigating social media company X and ByteDance's TikTok for potential violations, with fines of up to 6% of a company's global turnover being possible consequences.
The stricter regulations imposed on Shein could present another hurdle for the company's IPO plans, as it seeks approval from Beijing for a listing that is likely to face rigorous scrutiny from U.S. regulators. Shein's IPO ambitions have been the subject of speculation, and these new DSA rules may further complicate the process.
What is the Digital Services Act (DSA)?
The Digital Services Act (DSA) is a set of regulations that came into effect on February 17, 2024. It applies to all online platforms and aims to address issues such as illegal and harmful content, as well as counterfeit products. Under the DSA, companies with over 45 million users are classified as very large online platforms (VLOPs) and are required to take more action against these issues.
The DSA has already affected major companies like Meta Platforms, Google, and TikTok. These companies, along with sixteen others, are subject to the regulations and have been requested to provide information about their measures to combat illegal content and the sale of illicit goods online.
Shein's Large User Base and EU Market Entry
Shein, a Chinese-founded fast-fashion company, entered the EU market in August of last year. Since then, it has gained a significant user base, with an average of 108 million monthly active users across EU member states between August 2023 and January 2024. This large user base has brought Shein under the scrutiny of the European Commission, which is currently in contact with the company regarding its possible designation under the DSA rules.
However, it is important to note that no specific timeline has been provided for the designation, and Shein's IPO plans may face additional challenges due to the stricter regulations imposed by the DSA. The company is seeking approval from Beijing for its U.S. initial public offering, which is likely to undergo rigorous scrutiny from U.S. regulators.
Implications for Shein's IPO Plans
The stricter EU online content rules imposed on Shein could potentially complicate the company's IPO plans. Shein is currently eyeing a U.S. initial public offering and is seeking approval from both Beijing and U.S. regulators. The new DSA rules may add another hurdle to the already complex process.
Shein's IPO ambitions have been the subject of speculation, and the company's compliance with the DSA regulations will be closely watched. The DSA aims to ensure that companies take more action against illegal and harmful content, as well as counterfeit products, on their platforms. Compliance with these regulations will be crucial for Shein's IPO success.
